UNDERSTANDING ENDOWMENT


The Importance of Endowment

Endowment funds are important for a variety of reasons. The most prominent of these is that an endowment provides a source of ongoing annual support to address charitable causes. This source of funding can be invaluable in uncertain economic times when other support may no longer be available. During stronger economic periods, an endowment can provide funding to expand support and act as seed money for the development of new programs and services.

Endowment also provides intangible benefits. An endowment is a perfect way to create a lasting legacy reflecting support of a charitable cause or of the community by you, your family or your business. A nonprofit organization that establishes an endowment, is announcing to its donors that the organization will be here fulfilling its mission for decades to come. An endowment can also provide financial security to those organizations taking on new challenges and seizing new opportunities as they arise.

 

What is an endowment?

An endowment is a pool of assets – a portion of which is made available for charitable purposes annually. The remaining assets and investment returns are retained in the endowment to provide for growth of the endowment over time. An increasing amount of support will be available from the endowment over time as it grows.

Historically, endowments were defined as funds that only expended their “income” for charitable purposes. This “income” definition is now outdated as it does not reflect current investment management philosophies or could lead to a belief that no or limited funds are available from the endowment. Rather, modern endowment management makes a “portion” (not limited to “income”) of the endowment available to support the charitable causes you care about.

Why create an endowment with the Community Foundation for Southeast Michigan?

The Community Foundation exists to create a permanent source of community capital benefiting the residents of southeast Michigan in perpetuity. The Community Foundation knows how to manage and invest endowments in a way that fulfills the charitable goals of our supporters. We can help you create an endowment that will meet your expectations and address those issues you care most about.

Forever is a long time – what happens if the purpose for which you set up an endowment changes?

The Board of Trustees of the Community Foundation is required to assure that the endowment fund you create fulfills your charitable goals. If the purpose of the endowment ever becomes impractical, illegal, obsolete or incapable of fulfillment, our Board will modify the endowment agreement to as closely as possible meet your charitable desires. This variance power assures you that your philanthropy will always remain relevant – now and hundreds of years from now.

 

Please contact our Philanthropic Services staff at 313.961.6675 or use the form below if you have any additional questions regarding how we can assist you in bringing your philanthropic vision to life.